Haleon plc (LON:HLN) Will Pay A UK£0.02 Dividend In Three Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Haleon plc (LON:HLN) is about to go ex-dividend in just three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Haleon's shares before the 15th of August in order to be eligible for the dividend, which will be paid on the 19th of September.

The company's upcoming dividend is UK£0.02 a share, following on from the last 12 months, when the company distributed a total of UK£0.06 per share to shareholders. Calculating the last year's worth of payments shows that Haleon has a trailing yield of 1.6% on the current share price of UK£3.77. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Haleon has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Haleon

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Haleon is paying out an acceptable 52% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 23% of its free cash flow as dividends last year, which is conservatively low.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Haleon's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Unfortunately Haleon has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Is Haleon an attractive dividend stock, or better left on the shelf? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. All things considered, we are not particularly enthused about Haleon from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Haleon, you should know about the other risks facing this business. In terms of investment risks, we've identified 1 warning sign with Haleon and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.